|Owens & Minor CEO Cody Phipps|
Owens & Minor said that one of its major customers would not renew its existing distribution agreement. That customer represented a whopping $525 million in revenues for the company last year; the transition of the customer, an undisclosed national healthcare provider, is expected to start late in 2016.
Shares of Owens & Minor ($OMI) dropped about 11% in early trading on the news. The medical products distributor had revenues of $9.8 billion in 2015--so the loss translates into roughly 5% of that year's revenue.
For 2016, prior to the changeover really setting in, Owens & Minor reaffirmed its expectations of $2 to $2.05 in EPS.
"Although we are disappointed in the customer's decision to make this transition, we remain focused on achieving our long-term financial and operational performance goals," said the company's President and CEO P. Cody Phipps in a statement.
"As a leading global healthcare services company, we remain focused on implementing our transformation agenda, which will position Owens & Minor for sustained profitable growth in the domestic and international markets," he added. "We intend to provide more detail on this customer transition, as well as our progress toward our 2016 goals, when we release first-quarter 2016 earnings."
Owens & Minor will report its first quarter earnings after market close on May 3, with an investor call to follow the morning of May 4.
Leerink analyst David Larsen expects the customer loss to translate into a roughly $0.10 reduction in 2017 EPS.
"Management has been taking steps to stabilize the company and improve the cost structure, although ongoing customer losses continue to weigh on OMI and spurn its momentum. OMI is currently working through the roll-off of a large US customer (as of 10/1/15) which represents a ~$200M annual revenue drag in 2016." he said in an April 20 note.
Added Larsen, "Today's announcement represents an even larger customer loss ($525M in annual revenue) that will pressure 2017 results. The loss of large customer contracts in the U.S. in addition to challenges with OMI's international business keep us cautious."
- here is the announcement